Siemens CEO Loescher aims to take chairman with him

by Maria Sheahan,
July 30 2013, 09:24

Maria Sheahan

Siemens CEO Loescher aims to take chairman with him

FRANKFURT — Siemens CEO Peter Loescher, whose departure was announced after he issued profit warnings that wrecked the share price of one of Germany’s largest industrial conglomerates, may drag the man who hired him down with him, German daily Sueddeutsche Zeitung reported on Monday.

In what is quickly shaping up to be one of the most dramatic corporate battles in Germany in years, the newspaper cited company sources as saying Mr Loescher was willing to resign only if supervisory board chairman Gerhard Cromme also leaves.

Mr Loescher did not comment on the report.

Mr Cromme, who hired the smooth-talking Austrian Mr Loescher six years ago, lost his job as chairman at steel maker ThyssenKrupp earlier this year.

Siemens said in a tersely worded statement last Saturday that Mr Loescher would be leaving the company four years before his contract expires.

Two people familiar with the matter said the majority of the 20-member supervisory board favoured finance chief Joe Kaeser as a replacement for Mr Loescher, who has failed to deliver on his promises of growth and profitability.

The turmoil at the helm of Siemens, Germany’s second-largest company by market value and a bastion of its manufacturing sector, erupted after it issued a second profit warning this year, sending its shares plunging 8%.

Shares in Siemens rose as much as 2.3% in early trade yesterday but were flat by midday. The share price is still up 24% on a year ago.

Some investors believe Siemens veteran Mr Kaeser, if named, could turn the company around. "Mr Kaeser’s experience and detailed knowledge of the company make him suitable to succeed Mr Loescher, and we appreciate the breadth of his qualification and experiences," Commerzbank analyst Ingo-Martin Schachel said.

Others said they expected that Mr Kaeser would quickly tighten the reins on costs at Siemens — whose products range from gas turbines to fast trains and ultrasound machines — and sell more noncore businesses such as those that make rail technology or healthcare software.

Mr Loescher and Mr Kaeser have repeatedly said they worked well together, although Mr Kaeser has been taking the lead at investor conferences, laying out details of Siemens’ business while his CEO relied more heavily on broad comments.

When asked last year about rumours of friction at the top, Mr Kaeser said they complemented each other like "light and dark".

Mr Loescher has in the past promised the company would grow faster than rivals such as ABB, General Electric and Philips. But bungled acquisitions, charges for project delays and a focus on top-line growth have caused Siemens to fall behind.

Mr Loescher announced a plan last year to cut ¤6bn in costs over two years and lift core operating profit margin to at least 12% from 9.5% by next year.

Last week, Siemens rattled shareholders by abandoning its margin target and flagging ahead of tomorrow’s vote Mr Loescher was leaving.

On Thursday, Siemens is expected to report a 23% drop in quarterly core profit. The company’s failure to keep up with rivals has caused investors to favour companies that were faster to slash their cost base and focus on profitable business rather than on increasing revenue. Siemens trades at 11.6 times estimated 12-month forward earnings, at a discount to ABB and General Electric, which trade at multiples of 13.8 and 14.1, according to StarMine data.

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FRANKFURT — Siemens CEO Peter Loescher, whose departure was announced after he issued profit warnings that wrecked the share price of one of Germany’s largest industrial conglomerates, may drag the man who hired him down with him, German daily Sueddeutsche Zeitung reported on Monday.

In what is quickly shaping up to be one of the most dramatic corporate battles in Germany in years, the newspaper cited company sources as saying Mr Loescher was willing to resign only if supervisory board chairman Gerhard Cromme also leaves.

Mr Loescher did not comment on the report.

Mr Cromme, who hired the smooth-talking Austrian Mr Loescher six years ago, lost his job as chairman at steel maker ThyssenKrupp earlier this year.

Siemens said in a tersely worded statement last Saturday that Mr Loescher would be leaving the company four years before his contract expires.

Two people familiar with the matter said the majority of the 20-member supervisory board favoured finance chief Joe Kaeser as a replacement for Mr Loescher, who has failed to deliver on his promises of growth and profitability.

The turmoil at the helm of Siemens, Germany’s second-largest company by market value and a bastion of its manufacturing sector, erupted after it issued a second profit warning this year, sending its shares plunging 8%.

Shares in Siemens rose as much as 2.3% in early trade yesterday but were flat by midday. The share price is still up 24% on a year ago.

Some investors believe Siemens veteran Mr Kaeser, if named, could turn the company around. "Mr Kaeser’s experience and detailed knowledge of the company make him suitable to succeed Mr Loescher, and we appreciate the breadth of his qualification and experiences," Commerzbank analyst Ingo-Martin Schachel said.

Others said they expected that Mr Kaeser would quickly tighten the reins on costs at Siemens — whose products range from gas turbines to fast trains and ultrasound machines — and sell more noncore businesses such as those that make rail technology or healthcare software.

Mr Loescher and Mr Kaeser have repeatedly said they worked well together, although Mr Kaeser has been taking the lead at investor conferences, laying out details of Siemens’ business while his CEO relied more heavily on broad comments.

When asked last year about rumours of friction at the top, Mr Kaeser said they complemented each other like "light and dark".

Mr Loescher has in the past promised the company would grow faster than rivals such as ABB, General Electric and Philips. But bungled acquisitions, charges for project delays and a focus on top-line growth have caused Siemens to fall behind.

Mr Loescher announced a plan last year to cut ¤6bn in costs over two years and lift core operating profit margin to at least 12% from 9.5% by next year.

Last week, Siemens rattled shareholders by abandoning its margin target and flagging ahead of tomorrow’s vote Mr Loescher was leaving.

On Thursday, Siemens is expected to report a 23% drop in quarterly core profit. The company’s failure to keep up with rivals has caused investors to favour companies that were faster to slash their cost base and focus on profitable business rather than on increasing revenue. Siemens trades at 11.6 times estimated 12-month forward earnings, at a discount to ABB and General Electric, which trade at multiples of 13.8 and 14.1, according to StarMine data.

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